STRENGTHS

WEAKNESSES

Aging population

Significant household debt

Highly concentrated banking sector

RISK ASSESSMENT

Growth buoyed by Riksbank's very accommodative policy

After accelerating rapidly in 2015, the economy is likely to slow in 2016, but will remain firm. As in 2015, domestic demand will be the main driver of growth. The Swedish Central Bank's very accommodative monetary policy (negative key rate, quantitative easing) will support household consumption and investment, especially residential, by cutting borrowing costs. The decline in unemployment (6.2% of the labor force at end November 2015) will provide additional support to private consumption. Exports will benefit from the improved (although still modest) economic picture in the euro zone and more broadly across Europe. With regard to the industrial sectors, automotives and pharmaceuticals are performing better, while construction is showing signs of overheating. Meanwhile, following a strategic partnership deal between Sweden's Ericsson group and the US company Cisco Systems, the latter may end up buying the former. Such a transaction would have a very negative impact on private research and development in Sweden, insofar as Ericsson finances about 40% of the country's R&D. Nevertheless, Sweden's stated commitment to abandon fossil fuels by 2030 is a likely new source of investment in renewable energy. It should be noted that the share of renewable energy in energy supply is among the highest in the OECD.

The worsening property market picture is one of the main downside risks to the economy, given the very high levels of household debt (175% of gross disposable income). The risk of appreciation pressures on the krona vis-a-vis the euro, which is keeping inflation from returning close to its target (2%), could also affect the economy through lower exports, which could in turn prompt the Riksbank to further ease its monetary policy. In contrast, the strong increase in the population expected by 2020 is expected to sustain activity in the medium term through an increase in domestic demand. Sweden expects to receive between 100,000 and 170,000 refugees in 2016 (190,000 in 2015), mainly from Syria and Eritrea, according to the Swedish migration agency.

Healthy public finances and current account surplus

The 2016 budget will focus on particularly education and on the construction sector so as to reduce the tensions on the property market, as well as on simplifying the procedure for creating a start-up business (Stockholm is very active in this area). However, the impact on the public accounts balance is likely to be limited, insofar as the rise in public spending will be partially offset by the increase in public revenues (sustained economic growth) and by higher taxes on fuel and vehicles. The public deficit therefore looks set to remain stable in 2016, while public debt will decline slightly.

The current account balance should stabilise in 2016. The financial account surplus and the trade balance surplus will be stable, while import growth will be more dynamic (strong domestic demand) than that of exports.

The Swedish banking sector is well capitalised but very concentrated: the country's four main banks held about 86% of assets in 2014, representing 326% of GDP. The banking system thus presents a significant systemic risk, especially as household debt levels are high and property prices are rising fast, especially in Stockholm and Gutenberg.

Extreme right climbing in the polls

The next parliamentary elections will be held in September 2018. Despite Sweden's strong economic growth, the centre-left coalition (led by Stefan Löfven), composed of the social democrats and the ecologists, lost votes at the last surveys to the anti-immigration party, Sweden Democrats, which is, however, still in third place when it comes to voting intentions. This party and the main opposition party, the (centre-right) Moderate Party, could move closer to each other in the run-up to the next elections, even though there are sharp differences at the moment.

Sweden's business climate has improved thanks to a much-simplified process for setting up a business, according to the latestDoing Businessreport from the World Bank.

(Last update : January 2016 )

Payment

Bills of exchange and promissory notes are neither widely used nor recommended as they must meet a number of formal requirements in order to be valid.

Just as the rules for issuing cheques have become more flexible, so the sanctions for issuers of uncovered cheques have been relaxed over the years. Moreover, the use of cheques has been gradually declining in favour of bank cards.

Conversely, use of the SWIFT electronic network by Swedish banks provides a secure, efficient, and fairly cheap domestic and international fund-transfer service. However, as payment is dependent on the buyer’s good faith, sellers are advised to take great care to ensure that their bank account details are correct if they wish to receive timely payment.

Direct debits represent about 10 percent of non-cash payments inSwedenand are quickly growing in popularity. There are two types of direct debit inSweden: Autogiro Foretag (AGF) for B2B transactions, and Autogiro Privat (AGP) for B2C payments. They can both be used for one-time or recurring payments.

Debt collection

As a rule, the collection process begins with the debtor being sent a summons to by pay by registered mail demanding payment, within eight to ten days, of the principal amount together with any contractually agreed penalty interest.

Where there is no specific interest clause in the contract, the rate of interest applicable since 1st July 2002 is the six-monthly benchmark rate (referensräntan) of the Central Bank ofSweden (Sveriges Riksbank), plus 8 percentage points.

Under the Swedish Interest Act (räntelag, 1975, last amended in 2013), interest starts to accrue immediately from the due date or 30 days from a demand of payment has been sent to the debtor.

Where claims meet some basic requirements; it is overdue and mediation has been allowable, creditors can obtain an injunction to pay (Betalningsföreläggande) by summary proceedings trough the Enforcement Service. The application has to be made in writing and clearly express the grounds of the claim. No further proofs need to be submitted.

This Enforcement Authority (Kronofogdemyndigheten) orders the debtor to respond within ten days to two weeks. If the debtor fails to reply in time or acknowledges the debt a verdict will be rendered in accordance with the original application.

While formal, this system offers a relatively straightforward and quick remedy in respect of undisputed claims and has greatly freed up the courts. Creditors are not required to engage a lawyer but, in some circumstances, would be well advised to do so. On average the process takes two months from application to decision. The decision is immediately enforceable.

If the debtor contests the debt the creditor has the decision of either turning to the District Court (the first instance, Tingsrätten) or to terminate the process.

Proceedings involve a preliminary hearing in which the judge attempts to reconcile the parties after examining their case documents, evidence and arguments. It is up to the parties themselves to decide what proof they intend to submit and what facts they intend to bring to bear in their favour.

If the dispute remains unresolved, the proceedings continue with written submissions and oral arguments until the main hearing, where the accent is on counsels' pleadings (defence and prosecution) and examination of witnesses' testimonies.

In accordance with the “Principle of Immediateness”, the court bases its decision exclusively on the evidence presented at the trial. Barring exceptional circumstances, the judgement is customarily issued within two weeks thereafter.

As a general rule, the code of civil procedure requires the losing party to bear all legal costs considered reasonable as well as the attorney fees incurred by the winning party, beyond a given threshold claim amount (about 22,250 SEK, approximately 2,585 €).

It takes up to twelve months (in exceptional cases more) to obtain a writ of execution in first instance, bearing in mind that there is a widespread tendency inSwedento appeal against judgements. The Government’s target for 2013 is, however, that 75% of the civil cases at district court level shall be determined within seven months.

A reform of the civil procedure, 1st November 2008, was intended to modernise the procedural rules via better use during the trial of modern technology and greater flexibility in investigating the case.